Question
year 1 year 2 year 3 year 4 year 5 year 6 year 7 Potential Gross Rent $ 322,875.00 $ 330,947.00 $ 339,221.00 $ 347,701.00
| year 1 | year 2 | year 3 | year 4 | year 5 | year 6 | year 7 | |
| Potential Gross Rent | $ 322,875.00 | $ 330,947.00 | $ 339,221.00 | $ 347,701.00 | $ 356,394.00 | $ 365,303.00 | $ 374,436.00 |
| Less: Vacancies @ 5 % | $ 16,144.00 | $ 16,547.00 | $ 16,961.00 | $ 17,385.00 | $ 17,820.00 | $ 18,265.00 | $ 18,722.00 |
| Effective Gross Rent | $ 306,731.00 | $ 314,400.00 | $ 322,260.00 | $ 330,316.00 | $ 338,574.00 | $ 347,038.00 | $ 355,714.00 |
| Add: Other Income | $ 10,250.00 | $ 10,506.00 | $ 10,769.00 | $ 11,038.00 | $ 11,314.00 | $ 11,597.00 | $ 11,887.00 |
| Effective Gross Income | $ 316,981.00 | $ 324,906.00 | $ 333,029.00 | $ 341,354.00 | $ 349,888.00 | $ 358,635.00 | $ 367,601.00 |
| Property Taxes | $ 71,400.00 | $ 71,400.00 | $ 76,048.00 | $ 76,048.00 | $ 76,048.00 | $ 76,048.00 | $ 85,039.00 |
| Other Operating Expenses | $ 60,261.00 | $ 61,767.00 | $ 63,311.00 | $ 64,894.00 | $ 66,517.00 | $ 68,180.00 | $ 69,884.00 |
| Total Expenses | $ 131,661.00 | $ 133,167.00 | $ 139,359.00 | $ 140,942.00 | $ 142,565.00 | $ 144,228.00 | $ 154,923.00 |
| Net Operating Expenses | $ 185,320.00 | $ 191,739.00 | $ 193,670.00 | $ 200,412.00 | $ 207,323.00 | $ 214,407.00 | $ 212,678.00 |
1. Based on the NOI projection for the first year, estimate the mortage loan that will be available if the lender requires a debt coverage ratio of no less than 1.20. Anticipated loan terms are interest at 8.5% per annum, and level monthly payments to amortize the loan over 20 years. No discount points or loan origination fee is anticipated.
2. Round your mortgage loan estimate from Question #1 above to the nearest $100,000. Modify the projection to derive a 7-year projection of before-tax cash flow based on this loan.
3. Using the projection you made from Question #2 above, develop a 7-year amortization schedule that includes an anticipated remaining mortgage balance at the end of 7 years.
4. Using the forecasted future market value develop in Question #3 above (roundest to the nearest $100,000), estimate before-tax cash flow from disposal, assuming the following:
a) The property is sold at the end of the seventh year (before the first debt service payment falls due for the eigth year)
b) Transaction costs (brokerage, legal and accounting fees, and so forth) equal 8% of the selling price.
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Cost Accounting
Authors: Mark Lee Inman
2nd Edition
0434908320, 978-0434908325
